grace period

noun

Updated on: 26 Jul 2017

Definition of grace period

: a period of time beyond a due date during which a financial obligation may be met without penalty or cancellation

See grace period defined for English-language learners

Examples of grace period in a Sentence

The terms of the loan allow for a ten-day grace period.

First Known Use of grace period

1907

Financial Definition of GRACE PERIOD

grace period

noun

What It Is

A grace period is a period of time, usually about 10 days, during which a past due amount can be paid with little or no penalty.

How It Works

Let's assume your credit card payment is due on December 15. You forget to make the payment. On December 20, you remember. By then, though, it's too late. Your bill is past due.

However, if your account has a grace period, you can make the payment and the creditor might not assess a late fee or other penalty.

Why It Matters

Past-due bills often incur late fees, higher interest rates, penalties and other charges. Worst of all, the creditor might report the late payment to the credit reporting agencies, leaving a black mark on your credit rating (and even lowering your credit rating). In some cases, a bill get so past due (say, 90 or 180 days), that the creditor considers the account in default and may charge off the balance. A grace period gives customers a chance to catch up quickly before it's too late. After that point, the lender might assign or sell the account to a collection agency, which will try to collect the balance.

Source: Investing Answers

GRACE PERIOD Defined for English Language Learners

grace period

noun

Definition of grace period for English Language Learners

: an amount of extra time that someone is given to pay a bill, finish a project, etc.

Law Dictionary

grace period

noun grace pe·ri·od

Legal Definition of grace period

: a period of time beyond a scheduled date during which a required action (as payment of an obligation) may be taken without incurring the ordinarily resulting adverse consequences (as penalty or cancellation): as a : a period of 30 days or one month during which premiums on insurance policies may be paid without penalty b : a period of ten days during which certain security interests (as those in fixtures) must be perfected in order to have priority over conflicting security interests under Article 9 of the Uniform Commercial Code —called also days of grace